Business Review Issue 10/2012 March 26 - April 1 by Business Review

FOCUS: amb Wine Company is hoping to capitalize on the current trend for more upmarket bottles, with a Transylvanian wine named Liliac (Romanian for bat). Renowned Austrian oenologist Willi Opitz talked about its journey from grape to table »page 8

ROMANIA’S PREMIERE BUSINESS WEEKLY

March 26 -April 1, 2012 / VOLUME 16, NUMBER 10

NEWS

SMEs scheme

Lucian Anghel has hit the ground running after taking over as president of the Bucharest Stock Exchange in January. He told BR his vision for the BSE and how he intends to sell it to both international and local investors »page 8

The Vouchers for Innovation program launched this month is designed to give local SMEs a competitive boost » page 4 FOCUS

Legal landscape Further changes to tax and business legislation are due this year. BR examines their likely effect on local companies » page 7 FOCUS

Flat market The brewers’ droop may be over, as the local beer market stabilized last year, leading players to raise a glass to the future » page 10 PROPERTY

Logistical leader

CONFERENCE

Future of Europe Photo: Mihai Constantineanu

NEW VISION FOR THE STOCK EXCHANGE

With less traffic, an affordable workforce and just an hour from the capital, is Ploiesti the new Bucharest? BR finds out » page 12

Tony Blair, former UK prime minister, is due in Bucharest to debate the continent’s place in the New World Order » page 14

www.business-review.ro Business Review | March 26 - April 1, 2012

4 NEWS R&D

BUSINESS AGENDA March 26 09:30 Vodafone Foundation organizes an event to present the results of a volunteer program at the Vodafone headquarters in Bucharest. By invitation only. March 27 09:30 ZRP Insolvency organizes a business breakfast on ways to finance a company reorganization plan at its headquarters in Bucharest. By invitation only. 11:00 KRUK International organizes a press conference to present the results of a study on debt at Howard Johnson Hotel. By invitation only. 11:00 Romprest organizes a press conference to present its financial evolution last year and investment plans for this year at its headquarters in Bucharest. By invitation only. March 28 10:00 GolinHarris organizes a press conference to present a new business model at its headquarters in Bucharest. Matt Neale, international president of GolinHarris, will attend. By invitation only. 10:30 UniCredit Tiriac Bank organizes a press conference to present its financial results and estimates for this year at the Central Universitary Library. Rasvan Radu, CEO of UniCredit Tiriac, will attend. By invitation only.

March 29 ∫EVENT 14:00 BR organizes a workshop on access to ﬁnance that includes legal and practical aspects for Public Private Partnerships, EU Funds and State Aid, at Willbrook Platinum. By invitation only.

ouchers for Innovation, a financing option for small and medium enterprises (SMEs) that need services such as research, innovation, technological transfer and so on, has been operational since March 1, announced the National Authority for Scientific Research (ANCS) during a conference last week that brought together important pundits in this domain. The maximum value of a Voucher for Innovation cannot be higher than 90 percent of the project’s eligible expenses, or RON 45,000 (EUR 10,000). The program has an allocated budget of RON 6,450,000 Innovation comes under the lens in (in excess of EUR 1.4 million) for 2012. Romania Activities in domains such as industrial research, experimental development, techAs solutions to kick-start innovation in nical feasibility studies and the protection Romania, he proposed the introduction of of intellectual rights can be financed a fiscal facility, applicable in all EU memthrough the scheme. ber states, which gives investors in an inThe launch of the vouchers had been novative company tax exemption when discussed ever since last year but it is only now that they have become functional. they sell their stake. This already happens in some countries, but not yet in Romania, According to Cristian Parvan, general he said. Moreover, Parvan proposed that, secretary of the Association of Business for any product that is innovated in RoPeople in Romania, “The present time is Romania’s last shot at innovation. After oil, mania until it reaches the prototype stage, taxes be footed by the state. Last but not gas, gold and salt, we stand to lose innoleast, the financing focus should be moved vation as well if we do not apply some from large companies, which have more reshock measures. As things stand right sources at their disposal, to creative SMEs. now, there are only approximately 1 million Christina Leucuta, coordinator of the Romanian citizens working in industry. cluster policy, the Direction of Industrial We risk becoming merely a consumption Policies in the Ministry of Economy, said, market. But in order to consume, you need revenues. A market that does not pro- “The future will belong to clusters of firms in cooperation with universities and reduce does not have revenues so we shall search centers, and not to multinationals.” see how we are able to consume.”

The European Commission has already outlined a policy framework for action aiming to raise clusters’ level of excellence and openness. “These clusters only had private financing and yet they managed to survive. They each have a life cycle which is longer if they manage to innovate,” said Leucuta. In Romania, cluster associations are in their infancy. “For example, in the aviation domain, no group of well-known companies has made itself known as a cluster apart from SMEs, such as the Aerospace Transylvania Cluster. Other successful clusters have been formed in industries such as automotive, ITC, the creative industry, textiles, renewable energies and agro-food,” she said. SMEs do not have the resources to innovate on their own but, if they form clusters, they can decrease their costs and have a better shot. Pundits at the event agreed that competition in the future will be between territorial concentrations of companies. “If there is something that has remained active in the European Union it is competition among regions. In Romania, thanks to communism, the term ‘territorial concentration’ causes allergies, because of collectivism. The problem in Romania is the lack of confidence required for collaboration. This is why collaboration among Romanian companies in order to reduce their costs is very little used here,” commentators said. ∫ Otilia Haraga

PROPERTY

Local real estate market to stagnate in 2012, predicts Octagon

xperts speaking at the Watertight Diaphragm Walls – Buildings with Dry Basements event on the construction industry, organized last week by Octagon Contracting & Consulting, predicted Romania’s real estate market to remain flat in 2012. Alexandros Ignatiadis, CEO of Octagon Contracting & Consulting, said that political uncertainty and international economic volatility will most likely lead to stagnation this year. “This is the first conference of this kind organized by Octagon but we will continue the series of events dedicated to technical topics as we consider them useful for the geotechnical industry. We have brought together constructors, real estate developers, architects, project manager and designers to debate technical solutions, principles and sealing problems and risks related to the construction of watertight basements,” said Ignatiadis. The event was organized in partnership with the Romanian Society of Geotechnical and Foundations (SRGF), the Romanian Association of Construction Contractors (ARACO) the Association of Structure Engineers (AICPS), and the Institute for Studies and Power Engineering (ISPE). The company estimates that 25 percent of this year’s revenue will come from

Courtesy of Octagon

March 29 08:30 BR organizes Tax, Law & Lobby, an event that addresses the latest legal and ﬁnancial provisions that impact the business environment, at Willbrook Platinum. By invitation only. More at http://business-review.ro/br-events.

Scheme vouchsafes innovation for SMEs

Alexandros Ignatiadis, Octagon CEO

international projects. Octagon runs operations in Bulgaria, Greece and Turkey and last year it set up an office in the Iraqi capital Baghdad. “We are currently negotiating several contracts, one of which requires the execution of geotechnical works for an electric plant. We are also negotiating for an infrastructure bid. Both projects are located in Basra, southern Iraq, about 600 km from Baghdad, close to the border with Kuwait and Iran,” said Ignatiadis. Octagon Contracting & Consulting

reported EUR 12 million in turnover last year and a EUR 465,000 profit, a result in line with the levels reported last year, said Ignatiadis. For 2012 the company has similar targets. “We intend to grow the turnover of the Comat Electro industrial park to EUR 3 million compared to EUR 2.5 million last year,” added the CEO. In 2011 Octagon became the main shareholder of Comat Electro after increasing its stake to 58.5 percent. The industrial park covers 89,000 sqm of land and 20,000 sqm of industrial halls. The company is currently developing five projects locally, three of which are works on three segments of the OrastieSibiu highway. The company is also a subcontractor for Pa&Co International for works on the Bucharest-Brasov 1B highway. The fifth project is a bridge over the River Mures as subcontractor for Tehnodomus. Octagon Contracting & Consulting carries out special geotechnical works – diaphragm walls, slurry walls, bored piles, micropiles, grouting, anchors and sheet piles – general contracting, concrete structure works, steel works and restoration and consolidation works for historical and state-owned buildings. The company was set up in 2005 by Ignatiadis and his partner, Paschalis Paganias. ∫ Staff

www.business-review.ro Business Review | March 26 - April 1, 2012

NEWS 5

INVESTMENT

South Africa seeks closer investment ties with Romania

Pieter Swanepoel, SA ambassador

he South African Embassy in Romania has called for closer ties with Romania at a recently organized roundtable to highlight business opportunities between the two countries, which have just celebrated ten years of diplomatic relations. New Europe Property Investment (NEPI) is the most important South African investor in Romania, owning 26 income-producing properties and two developments worth EUR 341 million at end-2011. The recent acquisition of Romanian car battery producer Rombat by South African Metair Investments for EUR 42.8 million proves the African nation sees Romania as an investment opportunity, said roundtable participants. “South African investment in Romania totaled EUR 700 million, and that is over a relatively short period, as South Africa has been present in Romania since the early 90s,” said Pieter

Swanepoel, South African ambassador. The country closed its diplomatic representation in Romania during the 90s but reopened it a decade ago and there are plans to set up a chamber of commerce between the two countries in the next year. The ambassador said he keeps meeting people who believe they have opportunity in Romania. Neal Barber, associate in Blue Projects, a South African project management firm that came to Romania in 2007, says Romania has smart engineers in construction. His company has already worked on brewery extension projects and a greenfield shampoo factory for a multinational in Ploiesti. Trade between the two countries could be boosted by sea links, according to Corneliu Gavaliugov, former senator in the Romanian Parliament. “We can sign an agreement to have a sea route between Constanta and Durban,” said the senator. In terms of GDP comparison, South Africa’s nominal GDP was USD 363 billion in 2010, according to World Bank estimates, while Romania’s stood at USD 185 billion. “Since the beginning of March, around 180 visas have been issued for Romanians to travel in South Africa,” said Michele Pietersen, first political secretary. The ambassador said both countries have significant manufacturing experience in the automotive sector, and this could act as a starting point for improved collaboration. ∫ Ovidiu Posirca

PROPERTY

Finnish Honka hopes to sell ten log homes locally this year

og house manufacturer Honka has entered the Romanian market by appointing local company Finn Land Business as exclusive importer. The first house was built in Azuga last autumn and a second one will follow in Neptun. “Our expectations for the local market this year are balanced considering the economic environment. The target is to deliver and assemble ten houses by the end of this year, and from 2013 the figure will reach a level similar to the one reported in neighboring Bulgaria, Hungary, and Slovenia, where 50 to 80 houses are sold each year,” said Cristy Baisan, president of Finn Land Business. Buyers can choose from over 10,000 existing Honka house designs or come up with their own. The price of a built sqm is between EUR 300 and EUR 1,200 depending on the specifications of the owner – the house can come with built-in electric network, fireplaces, sauna and similar features. Once the order is placed, the house parts are manufactured from massive wood in the company’s two factories in Finland and later sent to Romania by truck, in about six weeks’ time. A house that covers between 80 and 100 sqm is delivered by one truck at a cost of be-

tween EUR 2,000 and EUR 3,000. The house can be assembled in about three weeks. However, the foundation is not included in the price and must be built in advance by the owner. Construction can be done entirely by the buyer as the houses come with an assembly manual. Another option is to pay for assistance from Finn Land Business, or have the company build the house entirely. The cheapest house costs EUR 40,000 and has a usable area of 70-80 sqm. Finn Land Business is owned by Romanian businessman Cristy Baisan and Honka’s subsidiary in Hungary. The company offers design, consultancy, logistics and construction services and plans to set up information centers in all its operational counties through real estate agencies. Finnish log house manufacturer Honkarakenne is the main supplier of Honka constructions – houses, cabins, hotels, restaurants and similar. Last year the company reported a turnover of EUR 55 million, 56 percent of which came from exports. It produces around 2,500 houses each year. Almost 80,000 Honka houses have been sold in about 50 countries since 1958. ∫ Simona Bazavan

www.business-review.ro Business Review | March 26 - April 1, 2012

6 INTERVIEW

Anghel aims to give BSE wings Lucian Anghel, the new president of the Bucharest Stock Exchange (BSE), wants to turn the institution into a real financing pillar of the economy, allowing SMEs to tap into the market. He says the public offerings for stateowned enterprises (SOEs) planned this year are crucial to make the BSE a regional financial hub. Anghel told BR about his ongoing battle to make the local stock market more appealing to Romanian and international investors. ∫ OVIDIU POSIRCA

CV Lucian Anghel

What are your plans for the BSE? We want to transform the stock exchange into a platform to finance the economy. In the first stage we are talking about stateowned companies, and after successfully showing, even to the state, that the stock exchange can finance the economy, we hope to convince private companies to seek finance for development on the stock exchange to create jobs and contribute to economic growth. All the board members have been busy trying to transform the capital market into an alternative financing platform for the economy, and we have set up eight pillars to do this. This includes the successful closing of public offerings and attracting new companies onto the stock exchange (52 eligible companies).

May 2007 – date chief economist at BCR January 2012 – date president of the administration board at BSE May 2009 – December 2010 administration board member at Erste Asset Management 1997 – 2002 PhD in Economics from ASE 2005 – 2006 Executive Development Program at HEC Montreal Canada

What is the status regarding the BSE CEO? It is important to say that the board is nonexecutive. We signed the contract with an executive search firm following a tender to bring in the right CEO for the BSE, who will implement the eight development pillars we have proposed and we expect this to happen fast. The CEO will bring more eligible companies, improve corporate governance, streamline regulation, reduce bureaucracy and implement international standards for trading. Strengthening firms in the BSE group will also be a priority.

How should the BSE look by 2015? By then it is essential we successfully close public offerings in SOEs that will create a critical mass, increasing the trading volume and establishing trust. When you see that you can finance EUR 40, 80, 300 million through the capital market, it is clear that you can finance between EUR 5 and 10 million for an SME wanting to extend, develop or make an acquisition. At present, investors are saying they’re going out in the capital market and can't raise EUR 5 million. Will the government seek to list more SOEs if the current offers are successful? Of course, and this is a market opener.

Photo: Mihai Constantineanu

How is the BSE supporting SOE listings? We want to implement turnaround as fast as possible so international investors can trade through brokerages in Romania. We have approved a special package for every public offering launched by the state. The BSE will offer a package of visibility, including conferences and support in roadshows. For Transelectrica the crucial factor will be the price requested by the government and this listing is the first challenge. We want to create a financial hub in Romania for SMEs that can seek finance through the stock exchange. The financial market in Romania is dominated by banks, which including leasing make up around 92 percent, and 85 percent is owned by banks with foreign capital. Large firms will secure financing from mother companies or banks, while smaller companies need an alternative so it is crucial they have one. This is something the Polish did 15 years ago.

The last IPO of an SOE on the BSE took place in 2007, so the Transelectrica offer will be a road opener. Once you are successful with the next ones you can prove to the local and international markets that Romania is attractive for international investors and can bring other companies onto the BSE, ensuring financing. SOEs in different sectors can find additional capital by issuing shares and investing in their own business. Instead of the state owning 100 percent of a company worth 100 units, maybe it is better it holds 75 percent in a company worth 200 units. The growth alternatives for the economy are EU funds and the capital market, which needs to become a strategic priority in the next 10 years. Foreign investors say it is hard to buy shares on the BSE. How can you solve this? If you are an investment fund and you don't have an account opened in Bucharest, there are Romanian laws and investors say this account opening lasts several weeks, because you need consultancy and lawyers. We want to implement the turnaround, meaning there are large international brokers with accounts in Bucharest that buy shares in the name of international clients and move them into their clients’ sub-ac-

count, avoiding this procedure. This is an international standard that we are trying to implement to reduce bureaucracy. We are hoping to implement it by the end of the Transelectrica offer. The Property Fund (FP) wants a secondary listing in Warsaw, and is also considering London. How will this impact the BSE? If I put myself in the shoes of Greg Konieczny (the FP manager), I understand there are captive investors in Poland, the pension funds, which can invest in an entity listed in Poland or in other OECD entities that have an investment grade rating. We are not in the OECD, so they have a limit of 5 percent outside. There were 203 IPOs on the Warsaw Stock Exchange last year, so it is hard to consider something outside the country. It is important for the FP and I understand this. I have started thinking how Poland designed the system; how it developed the pension funds and how it increased contributions in the second private pillar to create a local critical mass. How do investment banks of the likes of JP Morgan and Goldman Sachs view the BSE? The fact they were recently present on a panel during a conference organized by the

BSE and the Central Depositary denotes interest in Romania. They say that if the state chooses a consultant for a public offering, it should fully trust that consultant. Say we want to bring teams to the National Arena stadium, and only two teams can play, and we invite Barcelona, Real Madrid, Chelsea and Manchester United, but each has to come up with a 200-page PowerPoint presentation – this is not how things should be done. Do we need to be convinced by JP Morgan, Goldman Sachs and Citi they can carry out public offerings? The selected consultant wants a big price for the offer so their commission is bound to value, so they don’t want only to sell. These banks also say that the best practice models, including Poland, which makes offers, listen to the market. In a public offering, the consortium selected by the state says the market wants a certain price for the company, and the respective governments or Poland accept this price. There isn't a more transparent and correct instrument than capital markets, so if the market gathers offers and comes up with a fair price, it means that's it and the state accepts the word of the market. We will see this with the Translectrica offering. How do you combine the positions of president of the BSE and chief economist at BCR? It is a non-executive position to which I allocated a lot of time at the beginning; I haven't talked to my children in five weeks. I sleep six hours a night and I have expanded my work and sacrificed my family. I believe we have a chance to develop the capital market and Transelectrica is critical. I want to build a country for my children where they will want to stay, not to see them twice a year. I have the chance to develop something here and after a four-year mandate I will be able to look back and survey my accomplishment. After the new CEO is appointed my involvement will be reduced and I will return to normal duties. We have Schroll Matjaz of Franklin Templeton, who is highly experienced, and we welcome his presence on the board, because he can explain the role of a non-executive board. We have a strategy, a vision, and we will have a new CEO, so we will establish the targets, and the CEO will work around the clock. So I can start seeing my children again.

ovidiu.posirca@business-review.ro

www.business-review.ro Business Review | March 26 - April 1, 2012

FOCUS 7

Taxing conundrum: businesses call for friendlier legislation Romania’s new Civil Procedure Code will become law this summer, following the Civil Code which came into force last October, impacting company law. BR examines the major legal and fiscal changes expected to shape the business environment this year.

Mightier than the sword: the lobbying sector has room to grow in Romania

The most significant legal change expected this year is the enforcement of the New Civil Procedure Code by June 6. “The new enactment represents an opportunity to accelerate the settlement of claims, simplify the legal procedures, unify the jurisprudence and reduce the costs of the settlement of claims,” says Oana Stratula, partner at law firm Dragne & Asociatii. She adds that the new code encourages the use of mediation, at the same time improving the communication of procedural deeds. Catalin Oroviceanu, senior associate at law firm Clifford Chance Badea, says the new code brings changes that reduce the duration of lawsuits, but its impact will not be that visible this year. Stratula says the year has started in full swing, bringing legislative amendment such as an increase in the minimum wage, stricter conditions for granting loans, amendments to the tax legislation and an increase in energy prices.

up changes on tax income, bring new aspects to VAT and local tax and clarify the social contributions area,” says Nedelea. Schwartz adds that the most important provisions in the tax legislation, which includes the tax code, the code of fiscal procedure and norms of application, were the implementation of IFRS financial statements for banks, the introduction of all social contributions in the tax code, and the rules on anti-avoidance and anti-fraud, mainly in VAT. However, these changes partially responded to the requests of the business community, says the managing partner. “Since January 1, contributors have been able to benefit from a 50 percent deduction in the acquisition of fuel and the VAT on it, as well as a 50 percent VAT deduction when acquiring a vehicle for transporting persons,” says Nedelea. Some of the latest fiscal changes will improve business conditions but the frequent changes in the tax code make life difficult for business representatives and authorities.

Trying to cut red tape

Lobbying for transparency

The business community has already experienced some of the latest fiscal amendments and this year, an electoral one, may run the risk of populist economic and fiscal measures. “We hope our government will remain lucid and help the Romanian economy and state budget not to lose the fragile equilibrium obtained in 2011 with such difficulty,” says Dan Schwartz, managing partner at RSM Scot consultancy. Tudor Nedelea, tax director at DLA Piper Tax, says emergency government ordinance number 125/2011, which entered into force at the start of this year, had a significant impact on the business environment. “These changes implement a tougher system to prove eligibility for VAT registration, clarify the provisions on transactions made by an inactive contributor, set

Romania’s lobbying market is still underdeveloped as there are only 15 companies specialized in this field. The market ranges between EUR 5 and 10 million but its potential size is EUR 70 million, according to Liviu Mihaileanu, lobbying specialist and co-author of a book on the subject. Although the market is developing, lobbying, which doesn’t need to be made public, still lacks transparency, which impacts all stakeholders. “People don’t have a constitutional right to information, politicians don’t even want to be associated with a lobbying law and the lobbying industry is associated with corruption,” says Mihaileanu. He adds that a regulation of lobbying would bring more transparency and impose sanctions on those who break the rules.

∫ OVIDIU POSIRCA

www.business-review.ro Business Review | March 26 - April 1, 2012

8 FOCUS

Austrian winemaker bets on the bat What more fitting name for a wine that strives to blend the taste of the local terroir with modern techniques and comes from Transylvania than that of the mysterious bat? None – at least this is the view of the creators of the latest premium wine brand made in Romania, Liliac (Romanian for bat). There is a story to be told behind every business, and even more so when it comes to winemaking.

∫ SIMONA BAZAVAN

Grape expectations: only top quality fruit makes it into the wine

plans to sell 30,000 bottles this year, 30 percent of which will be exported to Austria.

The story behind the bat

Liliac’s winemaker is the renowned Austrian oenologist Willi Opitz. He has a vineyard of his own back in Austria, although he is trained and worked as a mechanical engineer. Opitz won the Late Harvest Winemaker of the Year prize in London in 1996 for sweet wines and in addition to the quality of his eclectic wine portfolio, he is also famous for the release of a special cuamb Wine’s modern lodge vée named Mr President, which was presented to Bill Clinton, and a CD that featured the orchestrated sounds of wine ferwinemaker uses schilfwein technology, mentation. which is similar to the ice wine process and Opitz admitted that when he first which involves drying grapes in order to heard of Beck’s plans to invest in wineconcentrate their juice. making in Romania, although the name of “Our wines are atypical and rather dethe country did not signify to him much ductive. They are fragrant and refreshing of a wine tradition, when he heard that the and although the grapes come from a reestate was in Transylvania he immediately gion with a strong history and tradition, thought of the bat. “Later, when coming our winemaking method is rather modern here, I learned that the bat in Romanian is called ‘liliac’ which sounds beautiful. as we target consumers who are willing to try more innovative varieties,” she reEvery time I mention it, it raises a smile (…) vealed. People associate it with stories and this is Micu added that the investments will the best ingredient for success. Emotion not stop here. Twelve more hectares of is our competitive edge,” explained land will be planted with vines this year Opitz. and another 15 ha will be added in 2013, Moreover, linking a wine brand with an reaching the final target of 65 ha. In 2013 animal name has become a trend in this inthe company also plans to double the dustry, especially in the New World, added surface of its winery, thus taking proIoana Micu, executive manager at amb duction capacity to 350,000 bottles of Wine Company. wine per year, a volume it believes will be Liliac wines are sold exclusively in in balance with the surface of grapevine the Horeca segment and specialized stores and will ensure the right conditions for with prices ranging between RON 24 and maintaining premium wine production. RON 98 for a bottle. The following varieties Future plans also include developing partare available: Sauvignon Blanc, Sauvinerships with local companies and augnon Blanc Private Selection, Feteasca thorities in order to tap into the region’s Alba, Feteasca Regala, Merlot Private Selection, Rosé and Nectar of Transylvania, tourist potential. As regards exports, amb Wine Compathe company’s signature dessert wine. ny wants to be able to export 40 percent of The wines strive to preserve the identity the targeted 350,000 bottles of wine it of the grapes and capture the charactermeans to produce in four years’ time. istics of the “terroir” while at the same time using modern vinification methods, “Consumers have already tried the New Zealand stuff and the South African stuff, said Micu. A premier for the region, the

Courtesy of Amb Wine

The Romanian wine industry has been enjoying something of a mini-boom of late, with foreign investors as well as local entrepreneurs acquiring a taste for the viticulture business. Several wineries that own fewer than 100 hectares of vineyard and take pride in premium wine production – both for the domestic market as well as for export – have been set up in the past few years. There is Lacerta Winery, founded by a group of Austrian and German investors in Dealu Mare; WineRo, which produces the Aliman wine and whose shareholders include Stephan von Neipperg, who owns several vineyards in Bordeaux, and KarlHeinz Hauptmann, a former director at Merrill Lynch London; Clos des Colombes owned by Frenchwoman Anne Marie Rosemberg in Dobrogea; Domeniile Sahateni, which was co-founded by Aurelia Visinescu, the first local female oenologist turned investor... and the list goes on. The latest name to join the list of local premium wine producers is amb Wine Company with the launch of the Liliac brand under the slogan, “Transylvania has never tasted more alive”. The company is part of Austrian amb Holding, which is owned by Alfred Michael Beck and is already present in Romania with two real estate projects in Bucharest and over 600 ha of agricultural land cultivated with cereals, which it hopes to double over the coming years. The story begins in 2010 when the Austrian investor bought 14 hectares of vineyard in Transylvania, in the picturesque wine-producing area of Lechinta near the village of Batos (Mures and Bistrita Nasaud counties). Two years and investment of EUR 3 million later, amb Wine now owns 38 ha of vineyard, a modern winery with the capacity to produce 100,000 bottles per year, and a lodge used for tasting on the estate. Last week the company launched its first vintage – from 2010 – and

Courtesy of Amb Wine

Renowned Austrian oenologist Willi Opitz, who came up with the “bat” name

Wine country: Transylvania

and they are thirsty for new things,” said Opitz, adding that the feedback from foreign consumers has been encouraging so far. Last Christmas, Liliac wines were presented in London at luxury department store Harrods and will also be presented this year at the Monaco Grand Prix as well as international fairs.

Romanians’ tastes move upmarket

The Romanian wine market has shrunk in the past couple of years, to EUR 350 million, according to Vine and Wine National Employers’ Union (PNVV) representatives. An important change last year was that although overall Romanian consumers didn’t spend more on wine than in 2010, more of them chose quality wines. The premium wine segment (imports included) is estimated to represent about 10 percent of the total market. According to the PNVV, in 2011 Romanian winemakers reported sales increases of between 9 and 20 percent for wines priced above RON 12 (approximately EUR 2.8) per 0.75 liter bottle. Meanwhile, 15 percent more DOC (denomination of controlled origin) labels were issued last year to local producers – 32.7 million such labels, a level similar to the one reported in 2009.

simona.bazavan@business-review.ro

www.business-review.ro Business Review | March 26 - April 1, 2012

LINKS 9

10 FOCUS

www.business-review.ro Business Review | March 26 - April 1, 2012

Signs of frothing: beer market bottoms out in 2011

PARTNER CONTENT

Recent VAT changes which may impact the Romanian business environment Tax law changes may influence economic agents in the course of managing their business, in devising and implementing medium and long-terms investment plans. Ioana Şandru, This material Partner, Zamfirescu will cover two reRacoti Predoiu, cent VAT changes Tax Advisors which may have a significant impact on the tax and liquidity position of Romanian companies.

Although nobody expects the record level of 20.2 million hl posted by the Romanian beer market in 2008 to be equaled anytime soon, the full half of the glass is that sold volumes stabilized in 2011, hinting at a long awaited recovery.

VAT treatment of assignments of receivables According to the new provisions of the Norms for the application of the Fiscal Code, enacted at the end of January 2012, if a business purchases receivables at a price lower than their face value, assumes the risk of debtors’ default and does not charge any commission for debt recovery, the business would not be deemed to perform a VAT taxable supply of services. This VAT treatment is a direct consequence of the decision issued by the European Court of Justice in the case C-93/10 GFKL Financial Services AG, whereby the Court considers that the difference between the face value of receivables and their acquisition price does not represent the consideration for a service rendered by the buyer of receivables, since there is no direct link between the service provided and the consideration received. Prior to this change, in case the assignment of receivables was motivated by the recovery of receivables by the buyer, the latter was deemed to perform a supply of services for consideration, which qualified as a VAT taxable operation, notwithstanding whether the buyer charged a commission to the seller of receivables. As such, for the buyer, the value of the taxable service was represented by the difference between the face value and the acquisition price of the receivables (if the receivables did not reach the due date) or by the difference between the economic value or market price of receivables agreed by the parties and their acquisition price (in case of overdue receivables). The new VAT interpretation regarding assignments of receivables may have a favorable impact on the assignment by financial institutions of nonperforming debts since, under certain conditions, such operations will not generate VAT costs for the financial institutions in the form of VAT charged by the buyers of receivables.

Getting a head: 2012 should bring a plateau for the beleaguered beer market

∫ SIMONA BAZAVAN After decreasing for two consecutive years, the local beer market reached 17 million hl in 2011, the same level as a year before, according to the Brewers of Romania Association (BR). The market value also remained stable at EUR 1.7 billion (based on shelf price). “After a difficult period which translated into a significant contraction of consumption, the maintenance of a flat beer volume for two consecutive years is the first positive signal that brewers’ efforts have managed to offset the negative economic context and stabilize the market, laying the foundations for the future recovery of the sector,” said Hezy Ovadia, president of the association. While flat beer sales are good news for the industry, volumes aren’t expected to increase significantly this year. “The record level reported in 2008 (e.n. 20.2 million hl) is not something that will be seen again anytime soon, but we can hope that 2012 will be in line with last year’s figures,” said Constantin Bratu, general director of the association, stressing that it all boils down to consumers’ purchasing power. “We have some of the lowest prices in Europe, but, even so, the local consumer has to work on average 30 minutes for a

liter of beer, whereas his European counterpart has to work only 8 minutes for the same quantity,” he said. Consumers continued to be very price-aware last year, increasing the volume of PET packaged beer beyond the psychological level of 50 percent. PET accounted for 51.3 percent (up 2 percent y-o-y), followed by bottle at 30.2 percent (down 1.5 percent), can on 14.8 percent (down 1.2 percent) and draft with 3.7 percent (up 0.7 percent). Imports accounted for a measly 0.27 million hl last year. According to the Brewers of Romania Association, 99 percent of the beer drunk in Romania is produced locally. The members of the association currently employ over 4,200 people in their ten breweries countrywide. However, the decrease in consumption brought about by the economic turmoil has led to several factories being closed in the past few years. Ursus, Heineken and Bergenbier each closed one brewery in 2010. Breaking it down by per capita consumption, last year the average Romanian drank 89 liters, up one liter y-o-y. In terms of consumption at European level, Romania ranked seventh in 2010 after the Czech Republic (144 liters), Germany (107 liters), Austria (105 liters), Norway (91 liters), Ireland (90 liters) and Lithuania (90 liters). The members of the Brewers of Romania Association are Bergenbier, Heineken Romania, Romaqua Group, United Romanian Breweries, Ursus Breweries and, as of last year, Clinica de Bere, a micro-brewery in Timisoara. The group also includes Soufflet Malt Romania and the Association of Hops Producers from Romania. Members’ contribution to the state budget through various taxes amounted to EUR 272 million in 2011, up EUR 2 million on 2010, according to data from the association. Member companies invested EUR 61 million last year, up EUR 10 million y-o-y, taking their total sum of investments since local market entrance to EUR 1.2 billion.

simona.bazavan@business-review.ro

Evolution of Romanian beer market (million hl) Year Total volume BR members ADVERTORIAL

Enlargement of the category of taxable entities which can set up VAT groups As of January 2012 companies owned in a proportion of at least 50% either directly or indirectly by the same shareholder may set up VAT groups, provided they are administered by the same tax body. Prior to this date, companies fulfilling the above shareholding condition could set up VAT groups only if they qualified as large taxpayers. In practice, groups of companies which are not eligible to set up VAT groups face the situation whereby some of the group companies are in a constant VAT paying position whereas the other companies need to recover VAT from the state budget. Although the legal deadline for refunding VAT is of 45 days following the filing of VAT returns showing the VAT refund option, in practice companies are forced to wait for long periods of time to obtain VAT refunds, especially in cases where the refund is made only after the performance of a tax control. Moreover, in certain cases, even if the tax controls generated by VAT refund requests should normally cover only the company’s VAT treatment, in practice there are numerous cases where the tax controls also cover other tax areas, which slows down the VAT refund process. In light of the recent tax changes, companies with common shareholders which are administered by the same tax body may follow the procedure which has applied so far only for large taxpayers. As such, the company belonging to a VAT group which is appointed as group representative should declare in a consolidated VAT return the results gathered from all the VAT returns of the members and should pay or request the refund of the corresponding VAT. The enlargement of the category of

taxpayers which can set up VAT groups will have a beneficial effect for groups of companies, in the sense of increasing the companies’ liquidity position, the predictability and efficient management of cash flows and investment plans.

2005 15.2 10.45

2006 17.7 12.6

2007 19.4 15.15

2008 20.2 16.46

*Sales of Romaqua Group are included, starting this year Source: Brewers of Romania Association

2009 17.6 16*

2010 17 15.3

2011 17 15.6

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LINKS 11

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12 PROPERTY

Ploiesti oils the wh industrial and logis

With a cheaper professional workforce and plots of land and far le drive away, Prahova County and Ploiesti are becoming an interest insiders active in the region tell Business Review. ∫ ANDREEA CEASAR Some players argue that Ploiesti is the right place to build distribution centers and logistic spaces as it can serve as a hub from which to more easily deliver products across country, thanks to its location, more affordable land prices and relative lack of traffic. “The Ploiesti area and Prahova County in general present much greater opportunity for industrial development due to the available land, quick access to road networks for distribution, strong available workforce, and a seem-

ingly more aggressive approach to attracting industrial development, as well as a business friendly attitude among the local authorities,” Randy Tharp, managing director of Epstein Architecture & Engineering, told Business Review. Whatever the opportunities, it is the local authorities who in fact determine the realization of investments. “From what our foreign clients tell us and the experience we have had in obtaining permits from the local authorities, I would describe the relationship with Ploiesti’s local authorities as very favorable. It seems they understand that industrial development, especially manufacturing, can drive the local economy and that this brings a benefit to the community through jobs, spending on local support services, increased retail spending, and so on and so forth. Furthermore they seem to understand that businesses need to move quickly with their projects once they have made a decision to make an investment,” added Tharp. According to the Epstein representative, even though the same permits are necessary and the process remains the same, projects seem to get a high level of attention and there is a greater sense of urgency in reviewing and returning comments or approving permits faster than in the past or in other locations such as Bucharest. Overall, as development in Bucharest takes much longer, even for simple projects, because of bureaucracy – which is much greater and seems to be less friendly to new investments – Ploiesti appears to be an attractive solution.

Foreign ﬁnance fosters faith Under the recently announced budget, local authorities in Ploiesti are expecting

income of over EUR 105 million. They hope to have investments of over EUR 70-75 million, Andrei Volosevici, mayor of Ploiesti, stated at the end of last year. And the figure could be realized based on the investments announced and made in Ploiesti until now. Public investments include 58 ha of green park (an investment estimated at EUR 21 million which started at the beginning of this year), a hippodrome put at EUR 43 million, upgrades to residential buildings and of course the modernization of infrastructure. Without foreign investments, the local authorities’ proposals would have little credibility in

t h e eyes of voters in this election year, but this is not the case. According to Ministry of Finance data, of more than 40 existing industrial parks in Romania, Prahova County is home to many of the most profitable. In 2010 Allianso Business Park recorded a net profit of almost EUR 1 million on a turnover of EUR 1.5 million. Meanwhile, Ploiesti Industrial Parc posted a net profit of EUR 750,000 on a turnover of EUR 1.3 million and Prahova Parc Industrial Valenii de Munte a profit of EUR 250,000. At the moment, Ploiesti West Park, developed by Alinso Group, is one of the largest industrial parks in Eastern Europe, extending on approximately 250 ha. Investors were and are still attracted by its unique position. American auto parts producer Honeywell has just started the construction of a factory for braking equipment here, on a surface of 7 ha, which will be operational before the end of the year. This will be the firm’s third factory, along with another two in Bucharest and Lugoj, which together provide more than 1,500 jobs. Aside from Honeywell, oilfield services companies Schlumberger and Halliburton have also recently announced their decision to establish activity in the park. These three new tenants join a list including Unilever, Lufkin, Toro Company, OTZ Logistics and British American Tobacco. Ploiesti now hosts many foreign petroleum investments, includes ones from OMV-Petrom, Lufkin, Schlumberger and Halliburton, due its historical background. The world’s first large refinery

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PROPERTY 13

wheels of gistic development

far less congestion than the capital, while being just an hour’s eresting extension of Bucharest’s industrial and logistic scene,

opened here in 1856-1857 with US investment, and since the communist years it has become a milestone in the development of petroleum, hydrocarbon processing and petrochemical industries. So companies in the field who set up operations here can take advantage of this tradition.

Where road and rail cross Alinso announced last year the official inauguration of the region’s first independently managed intermodal railway terminal in Ploiesti. It is operated in partnership with Rail Cargo Austria. “Thanks to its strategic location, several

industrial and logistic companies already use or have expressed their interest in using Ploiesti as their main logistics hub for South Eastern Europe,” said Ivan Lokere, CEO of Alinso Group, at the inauguration. The city is at the junction of the most important road and rail transport routes in Romania, creating a link between the east and west of the country, including the Black Sea harbors. Moreover, the terminal provides strategic access to major corridors in Western Europe. But manufactures’ attraction to this

“It seems they [the Ploiesti authorities] understand that industrial development, especially manufacturing, can drive the local economy and that this brings a beneﬁt to the community through jobs, spending on local support services, increased retail spending, and so on”

Randy Tharp, Epstein Architecture & Engineering area does not extend to all sectors. “There has not seemed to be a significant

increase in the demand for or development of pure logistic/warehouse facilities in the Ploiesti region in the last year. Although the continued development of projects has been steady, the pace seems to be similar to recent years. However, there has been an increase in the development of industrial projects, such as the Lufkin manufacturing campus and Honeywell manufacturing facility which are under construction and the Toro facility which was completed last year. We’re also seeing a number of other new manufacturing facilities in the planning stages for the Ploiesti area,” said Tharp, whose firm is currently the gen-

eral contractor for the 35,000-sqm Lufkin manufacturing campus in the Ploiesti area and is planning and designing another large manufacturing facility for another client – the identity of which is being kept confidential – in the area as well. According to a CB Richard Ellis report, the stock of industrial modern space reached by the end of 2011 across country is approximately 1,400 million sqm, of which more than 925,000 sqm is in Bucharest. The rest is largely in Timisoara, Arad and Ploiesti.

New jobs, new retail customers Due to the high potential for growth in the area, planned investments in retail have already been made public. Until now, two main developers have announced two malls, but while property fund NEPI has started construction works, signed many contracts with retailers and is aiming to finish the 56,000-sqm Ploiesti Shopping City project this year, AFI Europe is waiting to secure the finance to build a 33,000-sqm mall. “The Ploiesti area may see a stronger amount of retail and other commercial development because not as much new retail has been developed there in recent years as has been put in place in Bucharest,” said Tharp. Retail investments combined with real industry are a good basis for developing an area. But with a lack of announced logistic space projects for the near- and mid-term, can developers sustain their business?

andreea.ceasar@business-review.ro

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14 IN TOUCH / CITY RESTAURANTS

WHO’S NEWS Business Review welcomes information for Who’s News from readers. Submissions may be edited for length and clarity. Get in touch at simona.bazavan@business-review.ro

Elena Cosma

Iuliana Craiciu has joined international law firm CMS Cameron McKenna Romania. She has over 14 years of professional experience in business law, advising clients on legal matters related to a wide range of industries covering insolvency, restructuring, commercial and corporate law, energy transactions, financial and banking, tax and capital markets. Craiciu had worked for Musat & Asociatii as partner for the past five years. She had previous jobs at Voicu & Filipescu and in the legal department of KPMG Romania.

Mihaela Petruescu has been appointed head of the newly established retail leasing department of Capital Property Advisors. Petruescu is a consultant with over six years of experience on the local retail market. She graduated from the Faculty of Letters at Stefan Cel Mare University in Suceava and holds a master’s degree in business communication from the Romanian Academy of Economic Studies. To date Petruescu has been involved in all leasing phases of projects such as Arena Mall Bacau, Era Shopping Park Iasi, Mures Mall TarguMures, Adora Mall Craiova, Corall Constanta and Cora Brasov.

ager after having previously worked for BCR. He will be responsible for coordinating all the healthcare provider’s units in the Brasov and Sfantu Gheorghe area.Muscoiu has 11 years of professional experience in finance, 5 of which were in management positions. Until recently he served as regional SMEs coordinator for Bucharest at BCR. Over the years he has held various management positions at Unicredit Tiriac Bank, Volksbank and OTP Bank. He graduated from the Faculty of Economics at the University Transylvania in Brasov and holds an MBA.

Aurelia Cionga has been appointed president of Raiffeisen Banca pentru Locuinte (RBL) having held the position in an interim capacity since June last year. She has previously served as vice-president of operations, a position she had held since 2009. Between 2001 and 2009 Cionga was general secretary of Raiffeisen Bank and she also coordinated the acquisition of HVB Banca pentru Locuinte by RBL. Her appointment has been approved by the bank’s supervisory board but also needs to the authorized by the National Bank of Romania.

Stelian Stanga

has joined MedLife as regional man-

has been appointed vice-president of operations at Raiffeisen Banca pentru Locuinte, replacing Aurelia Cionga. He has 21 years of professional experience in banking. Stanga also worked for Banca Agricol between 1991 and 2001 before it was taken over by Raiffeisen. Over the years he has held several management positions in the bank’s retail division including product management and development director, special retail projects director, bancassurance director and retail activity development director, the last position he held before being appointed VP. His appointment has to be approved by the National Bank of Romania.

ISSN No. 1453 - 729X

FOUNDING EDITOR Bill Avery EDITOR-IN-CHIEF Simona Fodor SENIOR JOURNALIST Otilia Haraga JOURNALISTS Simona Bazavan, Ovidiu Posirca COPY EDITOR Debbie Stowe COLLABORATORS Anda Sebesi ART DIRECTOR Alexandru Oriean PHOTO EDITOR: Mihai Constantineanu PHOTOGRAPHER Laurentiu Obae LAYOUT Beatrice Gheorghiu

George Muscoiu

Courtesy of Cyberculture.ro

has been appointed executive manager of ZRP Insolvency SPRL. She joins the firm’s management team alongside Stan Tirnoveanu, managing partner of the law firm, and Calin-Andrei Zamfirescu, senior partner in the litigation and arbitration department. Cosma has 38 years of professional experience in banking and finance, specializing in credit related matters, recovery and restructuring of non-performing loans. She previously held management positions at BRD-Groupe Societe Generale and Bancpost. Cosma graduated in Economics with a major in Finance and Banking and holds an MBA in management.

Wu Xing opens restaurant in old center

The new Wu Xing outlet in the old city

hinese food delivery company Wu Xing has opened a new restaurant in Bucharest’s old center. The out-

let, the opening of which was marked with a reception and cookery demonstration, required a EUR 200,000 investment, and is intended to boost the company’s orders and profit by 10 percent on last year’s figures. As well as 45 inside seats, the restaurant can host another 20 diners on its terrace. The latest Wu Xing outlet joins other recent openings. Last year the firm opened a 40-seat eatery in Pipera, also at a cost of EUR 200,000. This followed another eatery in AFI Cotroceni which began trading in 2010. Wu Xing posted a turnover of about EUR 1 million in 2011. It has been operational since 1999 and today has a staff of 150. The new restaurant, which is at 14 Strada Covaci, has launched with a series of special offers and will stage daily cookery demonstrations between 19.00 and 21.00. ∫ Debbie Stowe

CONFERENCE

UK’s ex-PM Tony Blair due in Bucharest

ony Blair, the former British prime minister, is expected in Bucharest on Monday, when he is due to address the conference Europe’s Future in the New World Order. Blair, who now serves as official Envoy of the Quartet on the Middle East and has set up his own faith foundation, among other business interests, served as British Prime Minister from 1997 to 2007. He first became a Member of Parliament in 1983, and rose to become leader of the Labour Party in 2004. Blair is coming to Romania at the invitation of Victor Ponta, president of the PSD (Social Democratic Party) since 2010 and copresident of the opposition alliance USL (Liberal Social Union) along with Crin Antonescu, president of the PNL (National Liberal Party). The conference, Europe’s Future in the New World Order, is being organized by the Multimedia Foundation for Local Democracy and the Center for American Progress. It will take place at the RomanianAmerican University, on March 26, starting at 18:00. The Multimedia Foundation for Local Democracy was founded in May 1995, with the primary aim of bringing together a core of experts in social sciences, who would conduct analysis into and public assessments of Romania’s socio-political life. PUBLISHER Anca Ionita EXECUTIVE DIRECTOR George Moise SALES & EVENTS DIRECTOR Oana Molodoi MARKETING MANAGER Ana-Maria Stanca SALES & EVENTS Ana-Maria Nedelcu RESEARCH & SUBSCRIPTION Lili Voineag PRODUCTION Dan Mitroi DISTRIBUTION Eugen Musat

Bucharest bound: politician Tony Blair

Conceived as a think tank, the foundation has been active more in the areas of analysis and research than in civic involvement. The Center for American Progress, which is based in Washington, describes itself as a progressive think tank dedicated to improving the lives of Americans through ideas and action. It aims to bring about change by shaping the national debate, and cites its inspiration as figures such as Teddy Roosevelt and Martin Luther King. The center seeks to address 21st-century challenges relating to energy, the economy, national security, immigration, education and healthcare. ∫ Debbie Stowe ADDRESS No. 10 Italiana St., 2nd floor, ap. 3 Bucharest, Romania LANDLINE Editorial: 031.040.09.32 Office: 031.040.09.31 Fax: 031.040.09.34 EMAILS Editorial: editorial@business-review.ro Sales: sales@business-review.ro Events: events@business-review.ro